- We believe energy is a compelling sector, so we are providing you with another alternative (outside of the REIT sector).
- Our goal is to help investors maximize safe income over time, with a focus on "quality first, valuation second and proper risk management always."
- Plains All American and Plains GP holdings are strong buys to consider today.
- Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »
This article was co-produced with Dividend Sensei.
Despite $14 trillion in negative-yielding bonds (about 25% of all global debt), the high-yield world of midstream corporations and MLPs has been left for dead by many retail investors. Plains All American Pipeline (PAA) and its non-MLP equivalent Plains GP Holdings (PAGP) have been especially brutalized in recent years.
Worst Bear Market In MLP History Drags On Into Year Five
The perfect storm of negativity includes
The bursting of an MLP valuation bubble (PAA was 25% overvalued at its 2014 peak)
Two 40% to 77% oil crashes since 2014
An industry-wide liquidity crisis that forced many MLPs to switch to a self-funding business model (and required two payout cuts from PAA totaling 57%)
2018 FERC regulatory change that affected just a handful of MLPs but crushed the nascent industry rally
Three broader market corrections
Current economic uncertainty (hurting all energy stocks)
Political uncertainty surrounding Democratic Presidential candidates proposals to ban fracking
Our goal is to help members maximize safe income over time, with a focus on "quality first, valuation second and proper risk management always."
We know that precisely this kind of perfect storm of negativity can create immense opportunities to lock in safe and growing yield over time, as well as strong double-digit total returns that can help members achieve their financial goals.
Several subscribers have asked us to analyze Plains All American to highlight the reward/risk profile of this 9/11 quality midstream blue chip, one of 18 members of the Dividend Kings' "safe midstream" watch list.
Twenty years ago Plains All American was trading at about seven times EBITDA, the low end of its historical fair value range of seven to eight. Today it trades at just 5.7 times forward EBITDA indicating it should be able to outperform its long-term return history.
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